The Commerce Commission’s Final Report into competition in the personal banking was released today, there will be a whole host of market commentary about open banking but one item stood out to us:
Some consumers are also deterred by the compliance requirements driven by the Anti-Money Laundering and Countering Financing of Terrorism Act
If consumers aren’t switching banks due to the KYC requirements in the AML/CFT Act they face when opening a new bank account then either:
1. The KYC requirements within the AML/CFT Act are not fit for purpose; or
2. The Banks still haven’t nailed customer on-boarding despite being captured under the AML/CFT Act for 11-years.
Or perhaps both things are true and interlinked? Are the banks hands tied?
In our experience dealing with New Zealand’s the AML/CFT three supervisors over the past 11-years the RBNZ were the “strictest” when it came to the rules they set down for their Reporting Entities when onboarding customers. This is understandable considering banks are the gateways into the NZ financial system, but there really needs to be a mindset change to show the business common sense that the FMA and the DIA have shown in this area.
However, saying this, there is some leeway to have a smooth onboarding process in banking within the RBNZ’s AML framework. We have found that the banks that make the most of digital tools for a smooth customer onboarding, such as electronic identity verification and biometrics, are the smaller banks such as Heartland, TSB, and Dosh who would like to be NZ’s first Digital Bank.
See is it just a case of the big 4 banks sitting on their hands in this area?
The Commerce Commission has recommended:
The Government should prioritise competition concerns when reforming the AML/CFT regime.
In our view, this could be achieved relatively simply by:
1. The RBNZ gets more in line with the FMA & DIA when it comes to how they deal with customer onboarding requirements; and
2. Expand the Reliance provisions of the AML/CFT Act to allow for a broader sharing of verified identities and associated supporting documents.
The reliance aspect would allow for easy switching as it would allow an entity like Dosh to onboard a customer from another banking Reporting Entity (e.g. ASB) without the need for the customer go through another identity verification process. Afterall, the RBNZ would have already audited ASB and said they were happy with how they were onboarding customers, so why should the customer have to do it all over again and be put off from switching?
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